Unfair Play

'That is not the case if you are a private individual, and even a business can get badly caught out. Martyn Jones (17512) ordered a Mercedes car in Germany. By the time it was ready, circumstances had changed and he no longer wanted it. Not being able to cancel the order, he collected the car and drove it into the United Kingdom, leaving it with a garage to sell on his behalf. The car was never registered in the United Kingdom, let alone used here. For reasons unexplained in the decision, it took a year to sell it for export to Hong Kong. Meanwhile, acquisition VAT was payable.'

'Did he not get the acquisition VAT back when the car was exported?'

'No, as a private individual, he had no VAT return. The tribunal could find no basis for letting him off the VAT because the acquisition was complete when the car arrived in the United Kingdom. That it was not used here and was subsequently exported did not change that. The circumstances were unusual, but the only way out of the problem seems to have been to apply for registration in respect of the single transaction in order to claim zero rating for the export of the vehicle and the recovery of the acquisition VAT against that. Mr Jones represented himself and that possibility is not discussed in the decision. The tribunal did express sympathy because of the wording of notice 728, which refers to tax being due if a car is "kept and used" in the United Kingdom. This had caused Mr Jones to "act to his detriment" because he claimed that he would not have sold the car at that price if he had known that VAT was due. However, that sounds doubtful since market value must have been the determining factor, not whether VAT was due.'

'The problem only came to light when Customs refused repayment on a second sale when the shoes went to Russia and to Poland. Apparently, there is a procedure for correcting an "entry", meaning the documentation on which an import of goods is declared, although it is not clear from the decision whether this would have permitted Grandstand to treat them retrospectively as being in a Customs warehouse. In any case, this has to be done within three months of the entry and Grandstand was too late. Customs' refusal to repay the duty on the second export was confirmed by the tribunal.'

'Surely, that's a nonsense if ever there was one', said the Busy Practitioner. 'The United Kingdom is supposed to be a trading nation. How can Customs justify retaining duty because the unfortunate trader has not got the rules quite right when they know the goods have been exported?'

'A key aspect of the problem is that these rules are not set by Customs or even by Parliament', I replied. 'The law is in regulations made by the European Union Commission, which have to be rigidly applied. The only comment the tribunal made was that the fact that Customs had made an error first time round did not mean that they had to repeat it on the second occasion!

'If this had been a VAT matter, one could have caused considerable embarrassment within Customs over the wrong advice compounded by the incorrect repayment. In a duty case, I suspect that the only possible let out is to argue the principle of legitimate expectations, something not discussed at this hearing. The company was represented by its managing director and the principle of legitimate expectations is difficult to establish anyway.

'Actually, it seems to be worse than that. If you are importing quantities of goods, only some of which may be exported, depending upon what orders you can obtain, it is not necessarily practicable to use a warehousing régime. If this decision accurately records all the possibilities, the European Union rules seem to be seriously defective.

'Between them, Martyn Jones and Grandstand seem to suggest that it is a mistake to bring goods into the European Union if there is the slightest chance of them having to be exported again. Part of the problem in both instances was that these were people without previous experience of the rules, both of whom were given misleading advice by Customs.'

'Perhaps the customer might ask one to do so, so as to reduce the input taxes in his own country. I have seen it said elsewhere that a trader was caught doing it in order to reduce the risk of theft en route by making the goods appear less desirable. Notice 703 requires you to quote an accurate value. Apparently, any excess of the true value over that stated can be assessed at standard rate even though Customs know the goods have left the European Union.

'Greenalls Management Ltd (Excise case 196) illustrates yet another problem of proving that goods you hand over in the United Kingdom to a customer leave the United Kingdom. Vodka was supposed to be shipped direct from Greenalls' excise warehouse to other excise warehouses in Belgium and Spain. Copies of Greenalls' own documentation certifying receipt there turned out to be false. Greenalls, as the exporting warehouse keeper, was held liable despite having exercised due diligence in the matter. This problem may be put right by a Divisional Court judgment on 8 August 2001, which held that the excise duty point occurred when the goods irregularly left suspension. Greenalls would not be liable if the irregularity or fraud had occurred after the goods had left its warehouse. The case has been referred back to the tribunal because the facts need further clarification. Presumably, Greenalls' problem will be to show when the fraud started, assuming that the audit trail ceased to exist when it handed over the goods.'

'I only know the full story in the last case, but all five seem to show Customs interfering clumsily in United Kingdom international trade rather than facilitating it with common-sense. For a trading nation, that is not right.'